Martin Lewis: Our country’s children need to be cash savvy

10:06, 14 February 2011

ByManchester Evening News

It’s time to break the cycle of debt in the UK. It’s time for compulsory financial education in schools. Twenty years ago, student loans were introduced and now we’re about to massively increase the cost of studying.

It’s time to break the cycle of debt in the UK. It’s time for compulsory financial education in schools.

Twenty years ago, student loans were introduced and now we’re about to massively increase the cost of studying.

Disgracefully, we still educate our youth into debt but never about debt. This is something I’ve vowed to change.

Recently I stood next to Justin Tomlinson MP and the head of the Personal Finance Education Group as we launched the first ever All-Party Parliamentary Group on Finance Education.

It’s a way for MPs of all political hues to gang together to get kids taught about finance.

This isn’t just about debt, it’s about savings, and being a consumer in a super-competitive modern economy.

Get it right, and there’ll be less mis-selling, fewer debt problems and a more efficient economy.

This is one of the defining financial issues of our generation and we need as many people as possible to get involved. More than 100 MPs have signed up.

The best way to help is to write or email your MP and ask them to join the group. You can get help to do this and find a template letter at by logging on to mse.me/MPfe.

Even where schools have voluntarily introduced financial education, head teachers struggle to give it resources, as it’s not in the curriculum.

It mustn’t become an exercise in bank branding. Parents often tell me a bank went to their child’s school to help them set up an account.

Of course, any information is good, but we need to assess whether this is touting for trade disguised as generosity.

People are more likely to get divorced than change bank accounts and a befriended 10-year-old may well mean half a century’s custom and thousands of pounds of profit.

Not every bank is up to no good, but surely the right lesson should not just be "open a bank account and save". It must be, "choose the right account, open it and if it doesn’t treat you well, leave".

A few years ago, I taught a class of a dozen 15-year-olds to be ‘Money Saving Experts’ in a day for a TV programme.

We sent them home and between them they saved their parents £5,000. Hopefully, by teaching the younger generation will help break the cycle.

Here are my three key lessons …

1: A company’s job is to make money

It doesn’t make companies bad but it does mean they’re not your friend.

I’d start by taking an eight-year-old to the supermarket and pointing out sweeties near the till. Explain the supermarket’s a company, it’s job is to make money and it puts the sweets there to try and get you to ask mummy or daddy to buy them, so it makes more cash.

Grandparental ‘neither a borrower nor lender be’ logic is outdated. These days if you want to buy a house or go to university, the system forces you to borrow. The lesson is to differentiate between good and bad debt.

In fact, those told to ‘never borrow’ often get in worse trouble. Once they realise they do need to, they don’t deliberate between different debt types, thinking it’s all ‘bad’, getting them into nasty places.

Take student borrowing. Official student loans are the cheapest long term debt possible. You only repay nine per cent of what you earn over £15,000 (soon to be £21,000).

If you lose your job or drop your income and you don’t repay, no one will chase you and it isn’t on your credit file. Overall, that is ‘good’ debt.

Contrast this to banks’ zero per cent overdrafts, which after graduation charge 18ish per cent. They sort out short-term cash flow, but aren’t for long-term borrowing. This is OK debt.

Then there are credit cards, loans or any other type of commercial loan. Students shouldn’t touch it. This is bad debt. Avoid, avoid, avoid!

3. Loyalty doesn’t pay

While it’s a boon with boyfriends and family, when it comes to dealing with mobile phone companies, insurers, banks, shops and more, loyalty’s for losers.

Ask a class of 15-year-olds, ‘Who’ll get the best deal, a loyal customer or a new one?’ and the majority wrongly think it’s the long-stander. Kids need to know the best deals often go to new customers. They should make firms fight for their business.

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